Has the tone shifted? Piggs are buying?

[Rich Toscano]

After the site upgrade this weekend users will be able to create their own polls in the forum.

Regarding that other dude’s post, I agree that inflation and future mortgage rates should be considered (I think that both are going to go up). All things equal, it would be great to lock in debt for 30 yrs at these absurdly low rates, which in my opinion come nowhere near to reimbursing the lender for their risk of purchasing power loss over that timeframe.

But everything else isn’t equal. Prices are still declining, and it doesn’t take too much decline to “even out” a jump in rates. And for reasons that have been discussed at length elsewhere on this site, it is better to owe less at a higher rate than to owe more at a lower rate (should you get a chance to refinance, or should you end up selling earlier than you expected, not to mention that in a higher inflation/rate environment you are paying down the real burden of the debt at a quicker pace).

So inflation/rates are something to consider, but I disagree with the premise that you should knowingly buy an overpriced home on the speculation that rates will rise enough to eventually even out the loss.

Finally, I just have to say that I find the idea that the market will suddenly take off without us even realizing it to be ridiculous. Real estate moves slowly, and it specifically tops out and bottoms out slowly (see the prior boom/bust cycles). We are coming off a record shattering 10-year boom and there is little reason to expect the bust to end quickly. We are watching the market closely and while there is little to suggest a turnaround at this time, we are looking for those signs.

So considering the undue attention we are giving to this market, and considering its slow moving nature, why would you suggest that it will take off without us realizing it? You speak of bringing evidence — what evidence do you have that people on this site are that oblivious? The evidence suggests that the people on this site have been ahead of the trends, not behind it as you seem to suggest.

Rich

update Forgot to ask this as well — where is your evidence that “fancy loans” peaked in 2005? Everything I’ve seen suggests that 2006 was a far worse year for underwriting than 2005 (remember to consider refinances as well as sales).

[Bugs]

But the economy brings up other factors I have not come across in your conversations: rising inflation and interest rates. Here is where I make the arguement that buying now is in your best interest whether it is a home or long term investment.

You may have read the comments in this thread, but you obviously haven’t been following this blog for very long or you’d know that we’ve discussed the trade-off between rising interest rates and prices on several occasions.

I’ll spare you the long explanation and give you the 2-minute version instead:

1. The prices will wind up being very closely tied to the rental market before this is all over. That means that if the market rent for a house is $2,000/month, the mortgage/property tax payments at the bottom will be close, and in fact could possibly drop a touch lower.

2. This will (probably) happen regardless of what the interest rates are. If they stay below 7% that indicates to a price for that house of about $315,000, assuming a 10% down payment. If the interest rates rise to 12% that indicates to a price of about $200,000. In essence, the impact of financing will contribute to the pricing, just like it did when prices were increasing.

3. We’ve already figured out that it’s better for most people to buy at the low price/high interest scenario as opposed to the high price/low interest scenario. For one thing, with a high interest loan there is a chance that the mortgage interest rates will eventually come down, affording you the opportunity to refi at the lower rate and reduce your payment. For another, there are tax deductions for mortgage interest payments.

Nothing is certain and it is possible that Martians will come to Earth and share their secret to Warp Drive and transporter technology, thereby jump starting the real estate markets. But short of a miracle there’s no logical reason why these markets won’t return to the long term trendline, which for the PQ area is a long ways off yet.

If you’re happy with your purchase then by all means enjoy it. Go forth and be happy. However, I suggest you avoid reading this blog or the newspapers or any other source of information about SD real estate in the future because all it will do is invoke feelings of buyer remorse. We gave this same advice to one of our regulars last year and they ignored it – that turned out the be a bad decision for them.

FYI, the foreclosure rate hasn’t peaked yet and probably won’t peak prior to the end of this year. The second wave or resets from the Option ARMs doesn’t even start until next year and that’s the one that will be the knockout punch for CV, PQ, 4S and other “nice” neighborhoods in the region that relied on them. You ain’t seen nothing yet.

[Bugs]

But the economy brings up other factors I have not come across in your conversations: rising inflation and interest rates. Here is where I make the arguement that buying now is in your best interest whether it is a home or long term investment.

You may have read the comments in this thread, but you obviously haven’t been following this blog for very long or you’d know that we’ve discussed the trade-off between rising interest rates and prices on several occasions.

I’ll spare you the long explanation and give you the 2-minute version instead:

1. The prices will wind up being very closely tied to the rental market before this is all over. That means that if the market rent for a house is $2,000/month, the mortgage/property tax payments at the bottom will be close, and in fact could possibly drop a touch lower.

2. This will (probably) happen regardless of what the interest rates are. If they stay below 7% that indicates to a price for that house of about $315,000, assuming a 10% down payment. If the interest rates rise to 12% that indicates to a price of about $200,000. In essence, the impact of financing will contribute to the pricing, just like it did when prices were increasing.

3. We’ve already figured out that it’s better for most people to buy at the low price/high interest scenario as opposed to the high price/low interest scenario. For one thing, with a high interest loan there is a chance that the mortgage interest rates will eventually come down, affording you the opportunity to refi at the lower rate and reduce your payment. For another, there are tax deductions for mortgage interest payments.

Nothing is certain and it is possible that Martians will come to Earth and share their secret to Warp Drive and transporter technology, thereby jump starting the real estate markets. But short of a miracle there’s no logical reason why these markets won’t return to the long term trendline, which for the PQ area is a long ways off yet.

If you’re happy with your purchase then by all means enjoy it. Go forth and be happy. However, I suggest you avoid reading this blog or the newspapers or any other source of information about SD real estate in the future because all it will do is invoke feelings of buyer remorse. We gave this same advice to one of our regulars last year and they ignored it – that turned out the be a bad decision for them.

FYI, the foreclosure rate hasn’t peaked yet and probably won’t peak prior to the end of this year. The second wave or resets from the Option ARMs doesn’t even start until next year and that’s the one that will be the knockout punch for CV, PQ, 4S and other “nice” neighborhoods in the region that relied on them. You ain’t seen nothing yet.

[Bugs]

But the economy brings up other factors I have not come across in your conversations: rising inflation and interest rates. Here is where I make the arguement that buying now is in your best interest whether it is a home or long term investment.

You may have read the comments in this thread, but you obviously haven’t been following this blog for very long or you’d know that we’ve discussed the trade-off between rising interest rates and prices on several occasions.

I’ll spare you the long explanation and give you the 2-minute version instead:

1. The prices will wind up being very closely tied to the rental market before this is all over. That means that if the market rent for a house is $2,000/month, the mortgage/property tax payments at the bottom will be close, and in fact could possibly drop a touch lower.

2. This will (probably) happen regardless of what the interest rates are. If they stay below 7% that indicates to a price for that house of about $315,000, assuming a 10% down payment. If the interest rates rise to 12% that indicates to a price of about $200,000. In essence, the impact of financing will contribute to the pricing, just like it did when prices were increasing.

3. We’ve already figured out that it’s better for most people to buy at the low price/high interest scenario as opposed to the high price/low interest scenario. For one thing, with a high interest loan there is a chance that the mortgage interest rates will eventually come down, affording you the opportunity to refi at the lower rate and reduce your payment. For another, there are tax deductions for mortgage interest payments.

Nothing is certain and it is possible that Martians will come to Earth and share their secret to Warp Drive and transporter technology, thereby jump starting the real estate markets. But short of a miracle there’s no logical reason why these markets won’t return to the long term trendline, which for the PQ area is a long ways off yet.

If you’re happy with your purchase then by all means enjoy it. Go forth and be happy. However, I suggest you avoid reading this blog or the newspapers or any other source of information about SD real estate in the future because all it will do is invoke feelings of buyer remorse. We gave this same advice to one of our regulars last year and they ignored it – that turned out the be a bad decision for them.

FYI, the foreclosure rate hasn’t peaked yet and probably won’t peak prior to the end of this year. The second wave or resets from the Option ARMs doesn’t even start until next year and that’s the one that will be the knockout punch for CV, PQ, 4S and other “nice” neighborhoods in the region that relied on them. You ain’t seen nothing yet.

[Bugs]

But the economy brings up other factors I have not come across in your conversations: rising inflation and interest rates. Here is where I make the arguement that buying now is in your best interest whether it is a home or long term investment.

You may have read the comments in this thread, but you obviously haven’t been following this blog for very long or you’d know that we’ve discussed the trade-off between rising interest rates and prices on several occasions.

I’ll spare you the long explanation and give you the 2-minute version instead:

1. The prices will wind up being very closely tied to the rental market before this is all over. That means that if the market rent for a house is $2,000/month, the mortgage/property tax payments at the bottom will be close, and in fact could possibly drop a touch lower.

2. This will (probably) happen regardless of what the interest rates are. If they stay below 7% that indicates to a price for that house of about $315,000, assuming a 10% down payment. If the interest rates rise to 12% that indicates to a price of about $200,000. In essence, the impact of financing will contribute to the pricing, just like it did when prices were increasing.

3. We’ve already figured out that it’s better for most people to buy at the low price/high interest scenario as opposed to the high price/low interest scenario. For one thing, with a high interest loan there is a chance that the mortgage interest rates will eventually come down, affording you the opportunity to refi at the lower rate and reduce your payment. For another, there are tax deductions for mortgage interest payments.

Nothing is certain and it is possible that Martians will come to Earth and share their secret to Warp Drive and transporter technology, thereby jump starting the real estate markets. But short of a miracle there’s no logical reason why these markets won’t return to the long term trendline, which for the PQ area is a long ways off yet.

If you’re happy with your purchase then by all means enjoy it. Go forth and be happy. However, I suggest you avoid reading this blog or the newspapers or any other source of information about SD real estate in the future because all it will do is invoke feelings of buyer remorse. We gave this same advice to one of our regulars last year and they ignored it – that turned out the be a bad decision for them.

FYI, the foreclosure rate hasn’t peaked yet and probably won’t peak prior to the end of this year. The second wave or resets from the Option ARMs doesn’t even start until next year and that’s the one that will be the knockout punch for CV, PQ, 4S and other “nice” neighborhoods in the region that relied on them. You ain’t seen nothing yet.

[Bugs]

But the economy brings up other factors I have not come across in your conversations: rising inflation and interest rates. Here is where I make the arguement that buying now is in your best interest whether it is a home or long term investment.

You may have read the comments in this thread, but you obviously haven’t been following this blog for very long or you’d know that we’ve discussed the trade-off between rising interest rates and prices on several occasions.

I’ll spare you the long explanation and give you the 2-minute version instead:

1. The prices will wind up being very closely tied to the rental market before this is all over. That means that if the market rent for a house is $2,000/month, the mortgage/property tax payments at the bottom will be close, and in fact could possibly drop a touch lower.

2. This will (probably) happen regardless of what the interest rates are. If they stay below 7% that indicates to a price for that house of about $315,000, assuming a 10% down payment. If the interest rates rise to 12% that indicates to a price of about $200,000. In essence, the impact of financing will contribute to the pricing, just like it did when prices were increasing.

3. We’ve already figured out that it’s better for most people to buy at the low price/high interest scenario as opposed to the high price/low interest scenario. For one thing, with a high interest loan there is a chance that the mortgage interest rates will eventually come down, affording you the opportunity to refi at the lower rate and reduce your payment. For another, there are tax deductions for mortgage interest payments.

Nothing is certain and it is possible that Martians will come to Earth and share their secret to Warp Drive and transporter technology, thereby jump starting the real estate markets. But short of a miracle there’s no logical reason why these markets won’t return to the long term trendline, which for the PQ area is a long ways off yet.

If you’re happy with your purchase then by all means enjoy it. Go forth and be happy. However, I suggest you avoid reading this blog or the newspapers or any other source of information about SD real estate in the future because all it will do is invoke feelings of buyer remorse. We gave this same advice to one of our regulars last year and they ignored it – that turned out the be a bad decision for them.

FYI, the foreclosure rate hasn’t peaked yet and probably won’t peak prior to the end of this year. The second wave or resets from the Option ARMs doesn’t even start until next year and that’s the one that will be the knockout punch for CV, PQ, 4S and other “nice” neighborhoods in the region that relied on them. You ain’t seen nothing yet.

[cr]

Well said. It hasn’t changed for me, though I’m not looking in SD. A year ago anyone who asked me how long I thought prices would fall looked at me incredulously when I said (conservatively) 3-5 years.

Sure things have gotten better for those waiting, but look at the bigger picture and there is not a single factor that can help housing reach a bottom any time soon:

-Lending statndards: back where they should be
-Alt-A/Prime resets: as the bubble went on the lending got worse. A lot of damage still to come
-Inventory: may be down seasonally but foreclosures set records every month
-Sales: dominated by REOs and hurting other must sell inventory, or those who just want to sell
-Jobs: unemployment up, growth negative
-Interest rates: LIBOR up, and talk grows of Fed hikes
-Demographics: baby boomers will downsize, move to lower cost areas
-Savings: flat or negative, worst in history
-Inflation: soaring prices = less to spend on housing

This isn’t a doomsday dream list, it’s reality. It doesn’t mean you can’t find a good deal, it just means that good deal could get better.

[cr]

Well said. It hasn’t changed for me, though I’m not looking in SD. A year ago anyone who asked me how long I thought prices would fall looked at me incredulously when I said (conservatively) 3-5 years.

Sure things have gotten better for those waiting, but look at the bigger picture and there is not a single factor that can help housing reach a bottom any time soon:

-Lending statndards: back where they should be
-Alt-A/Prime resets: as the bubble went on the lending got worse. A lot of damage still to come
-Inventory: may be down seasonally but foreclosures set records every month
-Sales: dominated by REOs and hurting other must sell inventory, or those who just want to sell
-Jobs: unemployment up, growth negative
-Interest rates: LIBOR up, and talk grows of Fed hikes
-Demographics: baby boomers will downsize, move to lower cost areas
-Savings: flat or negative, worst in history
-Inflation: soaring prices = less to spend on housing

This isn’t a doomsday dream list, it’s reality. It doesn’t mean you can’t find a good deal, it just means that good deal could get better.

[cr]

Well said. It hasn’t changed for me, though I’m not looking in SD. A year ago anyone who asked me how long I thought prices would fall looked at me incredulously when I said (conservatively) 3-5 years.

Sure things have gotten better for those waiting, but look at the bigger picture and there is not a single factor that can help housing reach a bottom any time soon:

-Lending statndards: back where they should be
-Alt-A/Prime resets: as the bubble went on the lending got worse. A lot of damage still to come
-Inventory: may be down seasonally but foreclosures set records every month
-Sales: dominated by REOs and hurting other must sell inventory, or those who just want to sell
-Jobs: unemployment up, growth negative
-Interest rates: LIBOR up, and talk grows of Fed hikes
-Demographics: baby boomers will downsize, move to lower cost areas
-Savings: flat or negative, worst in history
-Inflation: soaring prices = less to spend on housing

This isn’t a doomsday dream list, it’s reality. It doesn’t mean you can’t find a good deal, it just means that good deal could get better.

[cr]

Well said. It hasn’t changed for me, though I’m not looking in SD. A year ago anyone who asked me how long I thought prices would fall looked at me incredulously when I said (conservatively) 3-5 years.

Sure things have gotten better for those waiting, but look at the bigger picture and there is not a single factor that can help housing reach a bottom any time soon:

-Lending statndards: back where they should be
-Alt-A/Prime resets: as the bubble went on the lending got worse. A lot of damage still to come
-Inventory: may be down seasonally but foreclosures set records every month
-Sales: dominated by REOs and hurting other must sell inventory, or those who just want to sell
-Jobs: unemployment up, growth negative
-Interest rates: LIBOR up, and talk grows of Fed hikes
-Demographics: baby boomers will downsize, move to lower cost areas
-Savings: flat or negative, worst in history
-Inflation: soaring prices = less to spend on housing

This isn’t a doomsday dream list, it’s reality. It doesn’t mean you can’t find a good deal, it just means that good deal could get better.

[cr]

Well said. It hasn’t changed for me, though I’m not looking in SD. A year ago anyone who asked me how long I thought prices would fall looked at me incredulously when I said (conservatively) 3-5 years.

Sure things have gotten better for those waiting, but look at the bigger picture and there is not a single factor that can help housing reach a bottom any time soon:

-Lending statndards: back where they should be
-Alt-A/Prime resets: as the bubble went on the lending got worse. A lot of damage still to come
-Inventory: may be down seasonally but foreclosures set records every month
-Sales: dominated by REOs and hurting other must sell inventory, or those who just want to sell
-Jobs: unemployment up, growth negative
-Interest rates: LIBOR up, and talk grows of Fed hikes
-Demographics: baby boomers will downsize, move to lower cost areas
-Savings: flat or negative, worst in history
-Inflation: soaring prices = less to spend on housing

This isn’t a doomsday dream list, it’s reality. It doesn’t mean you can’t find a good deal, it just means that good deal could get better.

[macmichael]

Re: interest rates

For those who didn’t live thru it, remember late 70’s and most of 80’s 8.5% would have been a screaming bargain.

Personally started building a house in 81 using all cash and when we ran out of cash finally got a mortgage at 16.75% so it could get finished. All the time savings and loan keep saying wait wait rates have to go down, but the just kep going up.

With the FED and politicians trying to bail out, give to, finance, stimulate, etc. everything in sight there is only one way rates are going to go. Let me let you guess which way. So as per others comments inflation, interest rates and down payments will be significantly more important in the future and must be factored in.

[macmichael]

Re: interest rates

For those who didn’t live thru it, remember late 70’s and most of 80’s 8.5% would have been a screaming bargain.

Personally started building a house in 81 using all cash and when we ran out of cash finally got a mortgage at 16.75% so it could get finished. All the time savings and loan keep saying wait wait rates have to go down, but the just kep going up.

With the FED and politicians trying to bail out, give to, finance, stimulate, etc. everything in sight there is only one way rates are going to go. Let me let you guess which way. So as per others comments inflation, interest rates and down payments will be significantly more important in the future and must be factored in.

[macmichael]

Re: interest rates

For those who didn’t live thru it, remember late 70’s and most of 80’s 8.5% would have been a screaming bargain.

Personally started building a house in 81 using all cash and when we ran out of cash finally got a mortgage at 16.75% so it could get finished. All the time savings and loan keep saying wait wait rates have to go down, but the just kep going up.

With the FED and politicians trying to bail out, give to, finance, stimulate, etc. everything in sight there is only one way rates are going to go. Let me let you guess which way. So as per others comments inflation, interest rates and down payments will be significantly more important in the future and must be factored in.

[macmichael]

Re: interest rates

For those who didn’t live thru it, remember late 70’s and most of 80’s 8.5% would have been a screaming bargain.

Personally started building a house in 81 using all cash and when we ran out of cash finally got a mortgage at 16.75% so it could get finished. All the time savings and loan keep saying wait wait rates have to go down, but the just kep going up.

With the FED and politicians trying to bail out, give to, finance, stimulate, etc. everything in sight there is only one way rates are going to go. Let me let you guess which way. So as per others comments inflation, interest rates and down payments will be significantly more important in the future and must be factored in.

[Author]

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